This goes against the larger trend seen in more mature markets where traditional messaging and calling services are being abandoned in favour of cheaper OTT services.

As more Kenyans get online, with 31.9 million internet users compared to 29.6 million in the previous quarter, the country has seen a gradual rise in internet penetration from 69% to 74.2% over the same period. Majority of these users access the internet through mobile, and as a result, they are opting for data-based messaging and communications solutions - apps such as applications Instagram, WhatsApp, Skype and Facebook Messenger - that ride on but do not rely on the telecoms providers’ infrastructure.

This shift has seen revenue from SMS drop by almost half even as the total number of messages doubled, with returns from SMS accounting for about 15 per cent of revenues. Kenyans sent 11.6 billion text messages between April and June 2016, compared to 6.5 billion text messages in the first three months of 2016.

Revenue from data is also down, with revenue for 2015/16 at 8.4 billion shillings compared to 10.1 billion shillings the previous year.

The decline in revenue could be due to bundling of SMSes and free giveaways that encourage people to text more. Operators are now adding on free text messaging to their data bundles. Safaricom, for example, offers customers the same number of SMS for the amount of data subscribed. When one buys the 150MB data bundle for KES 50 (US$0.49), for example, they get 150 SMSs added on for free.

Other mobile companies have moved to flat-rate, unlimited text messaging offers which will make the revenues to further decline if they have to remain competitive in the market.

International calls have experienced a decline, as they are far more expensive than OTT alternatives such as Skype and Viber. Additionally, the OTT alternatives offer services such as free video and conference calls, which traditional operators are unable to venture into at the moment.

In contrast, local calls have experienced a significant rise, with Kenyan operators recording a growth of 18.2% in the sector. The total call time for all operators over the three-month period was 10.8 billion minutes, up from 9.2 billion minutes, meaning that on average each user talked for 95.8 minutes per month during the quarter, up from 84.9 minutes. This rise can be attributed to special offers and free talk time promotions carried out during the period.

Mobile user numbers continue to grow according to the report, with users taking up extra lines to take advantage of services offered by mobile virtual network operators (MVNOs), and expansion of coverage through investment in network infrastructure. Mobile penetration stood at 88.1%, with 37.8million subscriptions, up from 36.1 million in the previous quarter.

The report further notes that 94.4% of Kenyans live within range of a mobile network, confirming data put forward by GSMA in the Access Gap Report released early in the year.

Could text messaging become extinct?

There is no doubt that instant messaging has already overtaken SMS as the consumer's favored form of communication, meaning that telcos will have to shift towards an indirect revenue model for the data rather than a direct one from SMS charges.

With consumers' preference shifting from text messaging to OTT services, one would assume that the SMS will eventually become obsolete.

However the statistics by CAK indicate otherwise, consumers will still use paid text messages. Due to their reliance on data, OTT services are unreliable in areas with intermittent coverage. Additionally, one is able to bypass the ‘noise’ on chat apps by sending a text that the recipient will be notified of instantaneously.

A Deloitte study [PDF] predicts that 50 billion instant messages will be sent in 2016, more than double the number of paid text messages (21 billion). However, the latter will generate revenues of $100 billion this year, and instant messages will only generate about 2% of that.

A major contributing factor to the positive uptake of mobile services by Kenyans is the demand for mobile value added services such as information services, mobile transaction services and mobile entertainment by service providers. Smartphone sales have also risen, thanks in part to the steep drop in prices and the growth of smaller manufacturers making flagship-quality devices that retail at feature phone prices.

The challenge to operators as user numbers grow is in maintaining quality of service. Existing infrastructure will have to cope as mobile data traffic soars, meaning that they will have to find ways to keep their clogged networks running smoothly.

CORRECTION: A previous version of this article indicated that the number of text messages sent was in decline. While revenue from SMS has declined, the number of text messages increased, and the article has been updated to reflect this.

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